Luke Johnson, the chairman of Gail’s bakery chain and a leading entrepreneur, has warned that some of his businesses “may not survive” under Labour’s proposed reforms to workers’ rights.
In a speech to the Employment Rights Bill committee, Johnson expressed concern about the additional costs and complexity that the legislation could impose on small and medium-sized enterprises (SMEs).
“In some cases, some of my businesses may not survive next year,” he told ministers. Johnson, who has a diverse portfolio including investments in Brompton bicycles and Revolution Bars, highlighted that insolvency specialists are anticipating a wave of business failures due to the challenging economic environment.
He stressed that the timing of the Labor Rights Bill was “incredible”, especially after the recent tax increases announced in the October Budget. Johnson argued that the combination of higher taxes and increased regulatory burdens could overwhelm smaller companies that don’t have extensive human resources departments.
“The idea that companies that can barely afford any kind of HR could stomach a big new bill of 150 pages in 28 sizes – they won’t even have time to read it,” he said. “You never know what the real costs are until you get a big tribunal.”
Labor’s proposed reforms aim to improve workers’ rights by providing greater job security, stronger flexible working arrangements and more powers for trade unions. Employees would also have the option to sue employers in court from the first day of their employment. While these changes are intended to protect employees, some business leaders are concerned about the potential impact on operating costs and hiring practices.
The government’s own impact assessment shows that the reforms could cost businesses up to £4.5 billion. Alex Hall-Chen, head of policy at the Institute of Directors, warned that the reforms could deter companies from hiring new staff, especially those considered ‘frontier candidates’, due to the increased risks and costs associated with industrial disputes.
Andrew Griffith, the Shadow Business Secretary, has called for the bill to be delayed until comprehensive impact assessments have been carried out. In a letter to Business Secretary Jonathan Reynolds, Griffith said the bill could impose “destructive and unacceptable burdens on business”, citing a watchdog’s findings that the government’s impact assessments were “not fit for purpose”.
Johnson’s comments underscore the tension between efforts to improve worker protections and the need to support businesses amid economic uncertainties. “Jobs don’t just fall out of the sky, they appear because businesses are created by risk takers,” he said. “If you destroy the private sector, you destroy jobs. Without jobs you have no civilization.”
As ministers continue to discuss the proposed changes, they are faced with the challenge of balancing workers’ rights and protections with the sustainability and growth of businesses, especially the small and medium-sized businesses that form the backbone of the UK economy .